Income Mobility by Region

Such an interesting NYT story about how different various US regions can be in terms of people being able to rise above the economic status they're born to:

In Climbing Income Ladder, Location Matters


Their sub-head makes it sound like New York and Boston have the highest chances for income mobility, but based on the map, it looks like the Dakotas and Nebraska area is actually the best of all? Odd... maybe some of these areas have had a boom in a particular industry that accounts for it. In any case, the stagnancy of incomes in the southeast is pretty dramatic...

From the article:

“Where you grow up matters,” said Nathaniel Hendren, a Harvard economist and one of the study’s authors. “There is tremendous variation across the U.S. in the extent to which kids can rise out of poverty.”

That variation does not stem simply from the fact that some areas have higher average incomes: upward mobility rates, Mr. Hendren added, often differ sharply in areas where average income is similar, like Atlanta and Seattle.

The gaps can be stark. On average, fairly poor children in Seattle — those who grew up in the 25th percentile of the national income distribution — do as well financially when they grow up as middle-class children — those who grew up at the 50th percentile — from Atlanta.

Geography mattered much less for well-off children than for middle-class and poor children, according to the results. In an economic echo of Tolstoy’s line about happy families being alike, the chances that affluent children grow up to be affluent are broadly similar across metropolitan areas.

Wealth by Age

I found this chart fascinating-- so much so that I had to take a shaky pic of it on the subway with my phone!

Why did older people's wealth skyrocket then while others were stagnant?

Income and Poverty Statistics

I love looking at data about income and wealth and poverty levels. I feel like we're so inundated with misleading information when people start talking about "the middle class" in relation to politics and taxes.

A report was just released of Census Bureau Stats about real income before taxes-- it's good to note that this is different from the Adjusted Gross Income stats often reported when people are referring to IRS data. Since weathy people tend to take more deductions for mortgage interest, charitable giving, 401k contributions, etc., it's important to remember that their real income is much higher than their adjusted gross income-- so when politicians talk about taxes that might affect someone whose income is above $200,000, they mean someone whose real income could actually be much higher.



But here's a few stats I found most interesting:



Overall, median household income adjusted for inflation declined by 2.3 percent in 2010 from the previous year, to $49,445.

That is for all households. Breaking it down a bit more:


Married couple households $58,036
Non-family, aka individual male $35,627
Non-family female $25,456

Median income of full-time, year-round workers:
Men $47,715
Women $36,931

15.1% of people are below the poverty threshold. Kind of an arbitrary line in the sand, as someone making a dollar more than the threshold isn't in great shape either. It's also interesting to note that about 34% of people are below 2X the poverty level. The poverty thresholds by household size are below:

# of people in household	48 states &DC	Alaska	Hawaii
1	$10,890	$13,600	$12,540
2	$14,710	$18,380	$16,930
3	$18,530	$23,160	$21,320
4	$22,350	$27,940	$25,710
5	$26,170	$32,720	$30,100
6	$29,990	$37,500	$34,490
7	$33,810	$42,280	$38,880
8	$37,630	$47,060	$43,270

211,492,000 Americans over the age of 15 earned money in 2010, or 67% of total population.



Interesting that it corresponds very closely to the total number of people age 15-64, presumably the ages of people you'd expect to work. But a lot more people are working past the age of 65-- about 8% of people over 65 had income in 2010.

Total popluation of US: 312,222,000

0-14 years: 20.2% (male 31,639,127/female 30,305,704)
15–64 years: 67% (male 102,665,043/female 103,129,321)
65 years and over: 12.8% (male 16,901,232/female 22,571,696) (2010 est.)




What this says to me is that almost half of all working individuals in the US couldn't support a family of 4 at more than poverty level. Two-income families have become a necessity... as has debt. The graphic below, which accompanied an article by Robert Reich, highlights this nicely:




All stats are from this Census Bureau report and Wikipedia citations of Census data.

Marginal Tax Rates

Consumerism Commentary has a helpful summary of the 2009 tax brackets. As Flexo points out, the way tax brackets work is often misunderstood, and people often just think their income is all taxed at a higher amount than it really is. I decided to put together a tax chart that shows how the actual tax amounts break down, in this case for a single individual like me.

Here's how the rates are explained:

Unmarried individuals (other than surviving spouses and heads of households):

If Taxable Income Is:	The Tax Is:
Not over $8,350	10% of the taxable income
Over $8,350 but not over $33,950	$835 plus 15% of the excess over $8,350
Over $33,950 but not over $82,250	$4,675 plus 25% of the excess over $33,950
Over $82,250 but not over $171,550	$16,750 plus 28% of the excess over $82,250
Over $171,550 but not over $372,950	$41,754 plus 33% of the excess over $171,550
Over $372,950	$108,216 plus 35% of the excess over $372,950

Here's my spreadsheet of how it works out for income at each of those breaks, plus some higher levels (click for larger image):


As is often pointed out, the highest marginal rates used to be much higher a few decades ago, and now people at the highest income rates pay quite a bit less than they used to. What if we added some higher brackets? Here's one scenario of how that might work, with the blue showing what would change and who would be affected:


My estimates for the percentage of the population affected were based on Wikipedia's stats on household income in the USA. A lot of households in the higher income ranges actually have two income earners, so this is far from precise. I'm not sure what percentage of taxpayers are single earners as opposed to married filing jointly or head of household, etc.

There are a lot of other variables to consider-- this is based on taxable income, and people at higher income levels are more likely to itemize and have more deductions to reduce their taxable earnings. It also doesn't take into account other forms of income such as capital gains, which is taxed at lower rates-- at the higher levels of wealth, much more income is likely to come from investment gains than a salary. And of course any state and local taxes would be in addition to these rates.

Regardless of all the subtleties, though, it's important to understand the basic concept! As Flexo points out, sometimes people "mistakenly believe that earning $1 over the barrier into the next tax level would result in a significantly higher tax bill because all income would be taxed at a higher rate, but that’s not true." And someone with a salary of $100,000 might think they're "in the 25% tax bracket," but even that level of taxable income only results in about 22% going to federal tax, and of course if your gross salary is $100,000, your actual taxable income will be far less if you factor in deductions and 401k contributions.

Keep all that in mind, though I doubt it will make you that much happier the next time April 15 rolls around!

What's a Necessity?

Here's something very interesting from Floyd Norris's blog on the NY Times website:

What’s a Necessity?

In 2006, 70 percent deemed [air conditioning] a necessity. This year the figure was down to 54 percent. Dishwashers, clothes dryers, microwave ovens and television sets are also seen as necessities by fewer people now than in 2006.

Overall, 52 percent think a television is a necessity. That is the lowest figure since that question was first asked in 1973.

The television breakdown is interesting. The older you are, the more likely you are to view it as a necessity. Among those over 65, 68 percent think a set is a necessity, compared to 38 percent of those age 18 to 29. But both those figures are down from three years ago.

Similarly, the young are more likely to view a cellphone as a necessity, and less likely to see a need for a landline.

Fascinating! I'm sure some of this must be a psychological adjustment to being faced with the possibility of not being able to afford something you used to think was necessary-- it's easier to accept if you can brush it off as something you didn't really need anyway! The data is from the Pew Research Center, where there is a nice chart that shows the sudden decline in necessary-ness of quite a few items!

Almost $13 Trillion in Net Worth Lost

From the NY Times website:

Net Worth of Families Down Sharply

Family net worth had hit an all-time high of $64.36 trillion in the April-June quarter of 2007 but has fallen in every quarter since that time.

The record 9 percent drop in the fourth quarter pushed total net worth down to $51.48 trillion, a level that is 20 percent below the third quarter 2007 peak.

Wow. If you estimate the population of the US at around 305 million, it's a drop from about $211,000 per person to $169,000 per person, a drop of $42,000 each. I can't say I'm proud of having done more than my share of the losing!

Changing Neighborhoods in New York City

The NY Times recently published some interesting statistics about changes in various neighborhoods since the last census in 2000.
Here's what they said about my neighborhood, "Sunset Park/Windsor Terrace," labeled #7 in Brooklyn on the graphic.

• 72% more adults with bachelor's degrees but no higher degrees
• 33% fewer residents who work in construction and manufacturing

None of that surprised me at all. My gentrifying neighborhood has changed a lot over even the past few years, let alone looking back to 2000. I wish I had more statistics about how rents have gone up in line with these demographic changes!

More Stats from New York Magazine

Another set of interesting stats from New York Magazine, though less scary than Monday's-- this, in fact, is rather heart-warming:

Citymeals on Wheels donations:

October 15, 2008:
603 donations
For a total of $49,201
Dow dropped 733 that day, closing at 8,577

October 15, 2007:
314 donations
For a total of $22,760
Down dropped 108 that day, closing at 13,984

It's good to know that some New Yorkers are more inspired to give when times get tough!

Stats from New York Magazine

Every week, New York Magazine has a little column called the Recession Index, subtitled "A numeric summary of our troubled times." Here's a few tidbits that I found interesting:

Cars and light trucks sold in the New York metro area in September and October
2007: 81,800
2008: 66,736

Unlimited-run Broadway shows closing during December and January:
2007-8: 3
2008-9: 7

College-educated New Yorkers receiving unemployment insurance:
Oct. 2007: 13,381
Oct. 2008: 20,072

Prescriptions for anti-anxiety medications filled at city pharmacies in September and October:
2007: 302,160
2008: 317,268

Morgan Stanley's annual profit, in billions:
2007: $3.14
2008: $1.59

Average annual pay for a Goldman Sachs employee:
2007: $661,490
2008: $363,654

Income to the MTA from a tax on real-estate transactions, in millions:
Dec. 2007: $103
Dec. 2008: $37


Scary stuff!

Scary Housing Price Chart

Yikes, here's a scary chart, courtesy of The Big Picture:


You can always say that history does not predict future results, etc, but I find it very interesting when two things relate to each other at an almost constant ratio for decades and then it just suddenly goes haywire! In this case, we're looking at household disposable income vs. home prices. What will it take to get that red line back to normal? Either housing prices have to fall a lot more, or income has to rise. Hmm, which do you think is more likely to happen soon?

A National Personality When it Comes to Finances?

I was intrigued by this article from this past Saturday's New York Times:
Smarting From Crisis in the Past, Germans Approach Bailouts with Reluctance

Germans tend to be the strait-laced, play-it-safe types in financial matters. That has left them particularly frustrated at footing the bill for bank bailouts and fretting over their accounts because of a global financial crisis that seems to emanate from the spendthrift ways of others and the unfathomable risks taken by Wall Street bankers....

Unlike in fellow European Union countries like Spain, Ireland and Britain, there was no real-estate bubble here. Germans abhor credit. And few own stocks, just 5.4 percent according to a study by the Deutsches Aktieninstitut, a nonprofit group that promotes equity ownership. Instead, most Germans sock away 11 percent of their incomes on average into savings accounts, often with Sparkassen, municipally owned savings banks that are popular and stable.

In these days when culture seems more and more globalized and homogeneous, it's just fascinating to me that two developed Western nations could be so different in terms of how their citizens behave financially. Of course each country has a spectrum of people who are savers and spenders, but the difference in averages is astounding-- Germans save 11% of their income, and Americans save ZERO percent. How did this happen?

Scary Stat of the Week

I saw this the other day on MSNBC.com: 1 in 10 boomers borrow for everyday expenses.

More Recent News: Cost of Prison, Expensive Placebos, and Payments for Good Grades

More recent news items of interest, all from the New York Times:

1 in 100 U.S. Adults Behind Bars, New Study Says

Nationwide, the prison population grew by 25,000 last year, bringing it to almost 1.6 million. Another 723,000 people are in local jails. The number of American adults is about 230 million, meaning that one in every 99.1 adults is behind bars.
....

Now, with fewer resources available, the report said, “prison costs are blowing a hole in state budgets.” On average, states spend almost 7 percent on their budgets on corrections, trailing only healthcare, education and transportation.

In 2007, according to the National Association of State Budgeting Officers, states spent $44 billion in tax dollars on corrections. That is up from $10.6 billion in 1987, a 127 increase once adjusted for inflation. With money from bonds and the federal government included, total state spending on corrections last year was $49 billion. By 2011, the report said, states are on track to spend an additional $25 billion.

It cost an average of $23,876 dollars to imprison someone in 2005, the most recent year for which data were available. But state spending varies widely, from $45,000 a year in Rhode Island to $13,000 in Louisiana.

The cost of medical care is growing by 10 percent annually, the report said, and will accelerate as the prison population ages.

More Expensive Placebos Bring More Relief

The investigators had 82 men and women rate the pain caused by electric shocks applied to their wrist, before and after taking a pill. Half the participants had read that the pill, described as a newly approved prescription pain reliever, was regularly priced at $2.50 per dose. The other half read that it had been discounted to 10 cents. In fact, both were dummy pills.

The pills had a strong placebo effect in both groups. But 85 percent of those using the expensive pills reported significant pain relief, compared with 61 percent on the cheaper pills. The investigators corrected for each person’s individual level of pain tolerance.

“It’s a great finding,” said Guy H. Montgomery, an associate professor of cancer prevention at the Mount Sinai School of Medicine who was not involved in the research. “Their manipulation of price affected expectancies of drug benefit, and pain is the ultimate mind-body phenomenon.”

Next Question: Can Students Be Paid to Excel?

The fourth graders squirmed in their seats, waiting for their prizes. In a few minutes, they would learn how much money they had earned for their scores on recent reading and math exams. Some would receive nearly $50 for acing the standardized tests, a small fortune for many at this school, P.S. 188 on the Lower East Side of Manhattan.

At Junior High School 123 in the Bronx, Jerome Johnson, a seventh-grade math student, also received cash awards.

When the rewards were handed out, Jazmin Roman was eager to celebrate her $39.72. She whispered to her friend Abigail Ortega, “How much did you get?” Abigail mouthed a barely audible answer: $36.87. Edgar Berlanga pumped his fist in the air to celebrate his $34.50.

The children were unaware that their teacher, Ruth Lopez, also stood to gain financially from their achievement. If students show marked improvement on state tests during the school year, each teacher at Public School 188 could receive a bonus of as much as $3,000.

School districts nationwide have seized on the idea that a key to improving schools is to pay for performance, whether through bonuses for teachers and principals, or rewards like cash prizes for students. New York City, with the largest public school system in the country, is in the forefront of this movement, with more than 200 schools experimenting with one incentive or another. In more than a dozen schools, students, teachers and principals are all eligible for extra money, based on students’ performance on standardized tests.

Reasons for a Rise in Mid-Life Suicide

The New York Times just ran an article about a disturbing spike in the number of suicides among middle-aged Americans, which is only just beginning to attract more attention, research, and prevention resources. The hypothetical causes discussed included depression, a decrease in the use of hormone-replacement therapy, and an increase in the use of prescription drugs. I thought for sure that the article would delve into the issue of financial stresses, but it didn't, really, other than alluding to unemployment as a possible trigger, among a list of things such as failed romances and substance abuse. The comments on the Times website, however, immediately hit that topic:

It's the economy, stupid. People aged 45-55 are among those most likely to be downsized, outsourced, laid off. Then they have no insurance or affordable medical care until they reach 65. Life has been getter tougher for many people, and national events are not cause for optimism.

— ajdemar, ca

Another factor is likely the economy. Suicides also tend to increase during severe economic downturns. Remember the "Great Depression?"

— Leo Toribio, Pittsburgh, PA

It's better to take control than to lose control. Life is getting longer, the risks are greater that as I age I will have bankrupting health or other problems and run out of economic resources. Our emphasis on individual rights and the knee-jerk resistance to taxation in this country means we are all on our own, that there is no social safety net in the USA like we see in most Western European countries; if something unforeseen should happen, I don't want to end up on the street or in a nursing home on medicaid... have you seen what that's like? And finally, being gay, I don't have confidence that my oh-so-christian family will be there for me if I should need help. It's a dog eat dog world. Who needs it?

— W, California

Other reasons were also mentioned in the comments, such as 9/11, the war in Iraq, and an increase in ageism in our youth-obsessed culture. Whatever the reasons, it's certainly a sad topic and certainly one that I hope never to have to face in my own family.

S&P 500 Trends

I was looking at how my investments were doing the other day, and found myself curious about what some historical trend graphs might look like. I found this chart of the S&P 500 via the NY Times website:

The numbers and red line are my own additions:
1- Data starts in 1971
2- I started working and putting money into 401k plans around here, but I don't remember if I even knew what I was doing enough to pick out stock-based mutual funds. Probably not.
3- After a few years of working and investing more aggressively in 401k funds, around here is when I started putting some of my other savings into mutual funds via E*Trade. I lost a little money at first during that slide into the low point around 2001, but I've had some good gains ever since.
I added the red line just to show a sort of trend-- it's interesting how the 90's seem like kind of an anomaly compared to an otherwise more gradual upward slope without major fluctuations. Also, ever since the 90s, the market seems to fluctuate more year to year-- back in the 70s the line was a sort of smoother upward trend overall, but more recently there are a lot of jagged ups and downs during the larger up-trends and down-trends.

Sometimes people talk about the market as if it is some kind of living creature, or something that has to follow certain rules. It does seem to follow certain patterns sometimes. We are always reminded, past performance is no guarantee of future results, but can past performance suggest that future results will follow similar patterns? I wonder what the shape of this graph will look like 20 years from now...

Happy Halloween!

I tried to google "price of pumpkins" just now, to see what I'd come up with... nothing all that interesting:


However, the search did lead me to this MSNBC.com story on what Americans spend on Halloween:

Americans will shell out just over $5 billion on the harrowing holiday this year, up 58 percent since 2002...

About 95 percent will buy candy, nearly $21 per person on average....

While the percentage of those decorating for Halloween remains the same, the average amount spent per person climbed 14 percent, to $26.59, over last year. Estimated price tag for all those Halloween decorations: $1.4 billion.

How much are you spending on Halloween? Personally, I'm spending ZERO! I am not dressing up and I don't expect to get any trick or treaters, so I haven't bought any candy. I haven't decorated at all, or even bought a pumpkin. If anyone asks me what I'm supposed to be, I'll say I'm pretending to be someone more frugal than I really am!